Despite Administration Promises, Obamacare's Federal Exchange Still Isn't Fully Built—and Won't Be Until Next Year



The back end of Obamacare's federal exchange—the guts of the system designed to communicate with and manage payments to health insurers—still isn't finished, despite explicit promises from the administration that it would be finished months ago. And it may not be ready this year. 

A document posted by the administration yesterday lists requirements for the next tech contractor to work on the federal insurance portal, according to Politico, which reports that whichever company wins the next contract, which would begin when the administration's current contract with Accenture, the company that replaced the original contractor CGI earlier this year, runs out in 2015, "is also slated to help construct major back-end components of the site that insurers need to get paid accurately."

It's the latest indication that the administration is having a serious problem completing work on the federal exchange's crucial back-end payment systems.

Those systems were originally supposed to be ready last year when the exchanges first went live, but development resources were shifted when the project fell behind prior to its disastrous October launch. In November of last year, a federal health official responsible for Obamacare's exchange technology admitted that between 30 and 40 percent of the federal exchange system had not yet been built.

After the consumer end of the federal exchange began to work better in early December, insurers began to openly worry that the back end systems would not be ready in January 2014, as the administration had promised. "We want to be paid," one unnamed insurance executive told The New York Times. "If we want to pay claims, we need to get paid."

But later in December, Kathleen Sebelius, then the Health and Human Services (HHS) Secretary, was adamant that the new systems would be ready the following month. "The financial management system, which is getting the insurance companies their money for accelerated tax credits and cost-sharing, is due to go into effect in mid-January," she told a congressional committee subpanel.

Sebelius was wrong. The back end systems were not ready in mid-January. When the federal government switched contractors from CGI to Accenture at the beginning of 2014, it said in a document justifying the rapid award of a no-bid contract that timely completion of the payment systems was critical.

"Failure to deliver" the payment functionality "by mid-March 2014 will result in financial harm to the Government. If this functionality is not complete by March 2014, the Government could make erroneous payments to providers and insurers," the document warned. If the payment system is not complete, "the entire healthcare reform program is jeopardized." A missed deadline for completion could "potentially [put] the entire health insurance industry at risk."

The back-end financial systems were not ready in March, or in April. They are still not ready now. Insurers are relying on quasi-manual workarounds instead. And in April, the administration, which refused give an estimated timeline for completion of the back end financial management systems when questioned by Politico, indicated in a document that the workarounds would last at least until September of this year.

Insurer payments are not the only issue. Incomplete work on back-end systems also appears to be affecting the federal exchange's ability to verify income and citizenship for people who apply for coverage. A June report from the HHS Inspector General found more than 2.9 million inconsistencies in federal exchange applications as of the end of February, a figure that grew to 4 million as of the end of May. Most of those inconsistencies have not been resolved. Serco, the contractor charged with processing those inconsistencies, has blamed delays in the "eligibility support desktop (ESD) functionality" that was supposed to help deal with eligibility verification problems. Former HHS Sec. Sebelius certified in January the the exchange's eligibility verification systems were working. 

The newly posted contracting requirements seem to suggest that the administration now believes construction of the financial systems won't be complete this year at all, and will carry over to whichever tech contractor gets the job when Accenture's deal runs out. If it's not complete this year, then that will mean that it won't be operational during Obamacare's second open enrollment period this fall.